Employers, beware. While you think you’ve retained an independent contractor for a project, for worker’s compensation purposes you may have just hired an employee.

In order for a person in Vermont to be eligible for workers’ compensation benefits, an employer-employee relationship must exist between the injured worker and the employer.

This relationship is defined by statute which defines an employee as: “An individual who has entered into the employment of, or works under contract of service or apprenticeship with, an employer.” While the law may make exceptions in certain circumstances, generally the Department of Labor takes a broad view as to who is included as an employee. The decisions emphasize that “the modern tendency is to find employment when the work being done is an integral part of the regular business of the employer, and when the worker, relative to the employer, does not furnish an independent business or professional service.”

The Department of Labor utilizes two tests, either of them being sufficient, to determine if a person is an employee for purposes of the law. The tests are the “Right to Control” test and the “Nature of the Business” test.

First the department will consider whether the employer controlled the work of the alleged employee. The inquiry will examine whether: the worker supplies his own tools and place of work, whether the method of payment is by time or by job, whether the work is part of the regular business of the employer and what the length of the employment is. Some employers assume that if a person is characterized as an independent contractor for tax purposes, that leads to the same determination for the employment status. That is one potential piece of evidence in determining who controlled the work being done but it is not dispositive.

The Right to Control Test is a laundry list that can be used to determine who controlled the work being done. Here are some of the typical questions that are asked:

n Who controls the means and methods of the work performance?

n Does the worker hold his services out to the general public?

n Does the worker perform the task without supervision?

n Does the worker possess the required permits, licenses, and certificates?

n Is the worker doing business as a corporation or under an assumed business name?

n Does the work require extensive skill, education, or experience?

n Who establishes the routine or schedule?

n What is the duration of the relationship?

n What is the method of payment, whether by time or by job?

n Are taxes deducted or withheld from the worker’s check?

n Who determines the hours of work?

n Does the worker receive fringe benefits or bonuses?

n Who provides the equipment necessary for completion of the work task?

An employer who hires an independent contractor can review those questions to have a general idea of whether the “Right to Control Test” favors employee or independent contractor status.

However, the inquiry does not end if the business does not control the worker. The department also utilizes the “Nature of the Business Test.”This analysis involves a determination of whether the work the injured worker performed was the business, trade, or occupation of the employer. If the answer is that the work was the business, trade, or occupation of the enterprise, then the worker is an employee. If the work carried out was in the course of work normally carried out by a direct employee then the injured worker is an employee. This test is very broad and intentionally inclusive.

Some employers seek to exclude people from workers’ compensation thorough execution of a contract. However, the courts have held that even if a person has signed an agreement purporting to absolve an employer of liability, that person may be an employee under the Workers’ Compensation Act if he is performing work normally performed by a direct employee. The intent of the parties at the onset of the relationship may be irrelevant as the status may change over time.

Employers should exercise caution when hiring independent contractors.When it comes to workers’ compensation there may in fact be an employer/employee relationship.

John W. Valente is an attorney with Ryan Smith & Carbine in Rutland. He is the author of “Understanding Workers’ Compensation: Managing Workplace Injuries and Lowering Costs.”